What is the company car worth?

September, 2014

By Clayton Payne

In the recent decision of the Fair Work Commission in Baker v Rio Tinto Coal Australia Limited, the agreed value of a company vehicle, which was provided for part-private use, was examined in the context of whether an employee had access to a statutory unfair dismissal remedy.

At the time the Applicant’s employment was terminated, as a non-Modern Award or Enterprise Agreement employee, she needed to be earning less than $129,300 per annum (the high income threshold) to have access to a statutory unfair dismissal remedy. [NB. The current high income threshold as of July 2014 is $133,000].

The Respondent argued that the Applicant’s remuneration package included $8,000 for the personal use of one of its vehicles, taking her income above the high income threshold.

The Applicant claimed that only $4,000 of this figure represented her “personal use” of the vehicle because she did not use the vehicle for private purposes, or did so on a limited basis.

Based on the evidence submitted by the parties, Commissioner Asbury found that a reasonable monetary value was agreed by the Applicant and the Respondent for a non-monetary benefit, being the provision of a company vehicle for private use, valued at $8,000. On that basis the Commissioner found that the Applicant’s earnings exceeded the high income threshold and that she could not bring a claim.

The Commissioner found “I am of the view that (the Applicant’s) actual use of the vehicle is not determinative of whether her annual rate of earnings exceeds the high income threshold. By virtue of the terms of a written contract of employment, agreed between (the Applicant) and (the Respondent), she is entitled to receive a non-monetary benefit – the private use of a motor vehicle – to which an agreed amount has been assigned”.

Conclusion

This case shows that it may well be worthwhile fixing a monetary value to the private use of a company car. In particular, as in this case, that agreed value may well push an employee’s income above the high income threshold. Not only might this effect whether an employee has an entitlement to bring an unfair dismissal claim, but more importantly, could be used as a means to take an employee who would ordinarily be subject to a Modern Award, outside of that Modern Award. It is submitted that an agreed value for a vehicle of $8,000 for private usage is probably reasonable in this instance. If, on the other hand, the agreed value was inflated to an unreasonable amount, one wonders whether this decision would be the same.